Relationships are important in the retirement plan industry, perhaps none more so than the one between plan sponsors and their record keepers.
Plan sponsors tend to rely on their record keepers for everything, including information, and often assume that since they have had a long relationship with one organization that that entity is doing everything in the plan’s best interest. But that’s not always the case, says Rhonda Berg, senior defined contribution consultant with Pavilion Advisory Group in Chicago. That’s why it’s imperative that plan sponsors, as fiduciaries of the plan, actively work to keep their record keepers on track.
Berg has worked on both sides of the fence — as a record keeper and as a consultant working on behalf of plan sponsors — so she is keenly aware of the problems that can develop from these professional relationships, she says. There are a number of different dynamics at play that can impact a plan, including downsizing, mergers and acquisitions and turnover. All of these things can affect a company’s relationship with its record keeper, but that doesn’t mean a company has to start shopping around for a new 401(k) provider.
“A lot of times there are things you can do within the framework of the relationship you have,” she says.
Sometimes a company has to go back to the beginning and remember why they offer a 401(k) plan to begin with, Berg says. What is their strategy and how does their record keeper fit into that model?
“Once they have that goal or develop that vision or philosophy, who do we have to support that?” she asks. Much of the plan support comes from the record keeper so it is up to the plan sponsor to make sure the record keeper is doing what it is supposed to do.
Industry experts agree that plan sponsors should reevaluate their plans every couple of years to make sure they are still working the way they should.
“We have a lot of clients that run RFPs,” Berg explains. “In some cases, they stay where they are because there is no compelling reason to move. But it is important to document that a company went through this process and the rationale behind their decision to stay or change plans.
“I think the main thing for plan sponsors is to always ask the question of their record keeper. If something is gnawing at them or things are not working quite right, at least ask for what it is that would work right or better, whether it is fees or responsiveness or services,” she says. It could also pertain to the functionality of the record keeper’s website.
“Always ask,” she says. “There might be something in development or something in play you are not aware of or there might be something doable at no greater cost.”
If a company is not getting the answers it wants to hear, then maybe it is time to start shopping for a new one, she adds.
There are a couple of questions plan sponsors should ask themselves about their record keeper: How quickly does the record keeper respond back to them when they have questions? When there is a problem, how quickly and thoroughly is the problem resolved? Does the record keeper admit when a mistake has been made or do they make excuses?
Plan sponsors also need to look at a record keeper’s processes, system improvements and updates. How old is your record keeper’s website? Is their system upgraded enough to be able to adapt to the type of upgrades you want to make available to plan participants?
The other point deals with overall communication. Employers should be able to be open and honest with their record keeper, Berg says. It’s also a good idea for plan sponsors to have set meetings with their record keeper to discuss outstanding issues, strategy and improvements to the retirement plan.
Sometimes the record keeper and its processes can be fantastic, she says, but the person you are dealing with on the record keeping side doesn’t mesh well with your company.
“If that is the case, you can change who that person is,” Berg says. “It doesn’t have to be that particular representative or relationship.”
She also recommends that plans review their service agreement with their record keeper on a regular basis. This is the document that outlines what services a record keeper is going to provide and when it needs to perform those services. Any service agreement should include provisions for dealing with problems or poor performance.
It is up to a record keeper to send out participant statements or checks on time. There needs to be something in the service agreement that lays out what will happen if the record keeper doesn’t uphold its end of the bargain.
Berg says that companies should include things like call center customer service metrics, participant transaction accuracy and turnaround and timeliness and accuracy of compliance testing within their service agreement.
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